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enOn Balance: Review of The Cost-Benefit Revolution by Cass R. Sunsteinhttp://benefitcostanalysis.org/balance-review-cost-benefit-revolution-cass-r-sunstein
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p><img style="float: left; height: 120px; width: 120px;" class="media-element file-default" data-delta="1" typeof="foaf:Image" src="http://www.benefitcostanalysis.org/sites/default/files/Headshot_0.jpg" width="2028" height="2029" alt="" />&nbsp;January 9, 2019</p>
<p>&nbsp;<em>By: Lisa A. Robinson</em></p>
<p><em>&nbsp;</em>Fomenting revolution brings to mind crowds storming the barricades, not analysts struggling to debug a spreadsheet or craft a clear&nbsp; &nbsp;sentence. Yet in his book, <em><a href="https://mitpress.mit.edu/books/cost-benefit-revolution">The Cost-Benefit Revolution</a></em>, Cass Sunstein (Robert Walmsley University Professor, Harvard Law School) argues that benefit-cost analysts are doing exactly that. The barricades we surmount are decision-making errors resulting from overreliance on intuition and emotion, our weapons are science and economics, and our achievements are better policies.</p>
<p>As a previous Administrator of the Office of Information and Regulatory Affairs in the U.S. Office of Management and Budget, which oversees the U.S. regulatory program, it is not surprising that Sunstein focuses on the use of benefit-cost analysis in the regulatory realm. However, his insights and conclusions are broadly applicable to wherever benefit-cost analysis is practiced.</p>
<p>Those of you who are familiar with Sunstein’s scholarship will recognize familiar themes. He integrates and builds on previous work, including articles initially published in the<em> Journal of Benefit Cost Analysis</em>: “<a href="https://www.cambridge.org/core/journals/journal-of-benefit-cost-analysis/article/value-of-a-statistical-life-some-clarifications-and-puzzles/7C9C27FAB00A11D4EA5268D1F7653DC7">The Value of a Statistical Life: Some Clarifications and Puzzles</a>” and “<a href="https://www.cambridge.org/core/journals/journal-of-benefit-cost-analysis/article/costbenefit-analysis-whos-your-daddy1/D92F4DE69C141834B54B422A7BCFC3CC">Cost-Benefit Analysis, Who’s Your Daddy?</a>.” Among these themes, the most central are the findings from behavioral science which indicate that our intuition often leads us astray. Sunstein argues that benefit-cost analysis is an important corrective, promoting more rational decisions. He reminds us that we can agree or disagree on the underlying theory while still agreeing that the results provide useful and important information about the consequences of alternative policy choices.</p>
<p>In the first part of the book, Sunstein surveys the current landscape. He begins with an instructive history of the development and scope of longstanding U.S. requirements for regulatory analysis. He then discusses benefit-cost analysis’ power as a “foreign language.” Behavioral researchers find that when people use a second language, the change in terminology blunts their emotional responses and leads them to make more rational decisions. Benefit-cost analysis similarly reduces people’s tendency to rely on potentially erroneous intuitive judgments by replacing normal discourse with more technical language from economics and science.</p>
<p>An important example of this foreignness is the concept of the value per statistical life or <a href="https://benefitcostanalysis.org/balance-review-%E2%80%9Cpricing-lives-guideposts-safer-society%E2%80%9D-w-kip-viscusi">VSL</a>. Although not well-understood by the general public, VSL represents individual willingness to pay for a small change in one’s own likelihood of dying in a defined time period. By relying on this approach for valuation, analysts respect individuals’ preferences for exchanging income for improvements in their own well-being. Typically, however, regulatory analysts use population-average values, in part to address distributional concerns. Otherwise, benefits that accrue to the wealthy would be more highly valued than benefits that accrue to the poor; the wealthy have more money available to expend on risk reductions as well as other things.</p>
<p>One question Sunstein addresses is the extent to which individual willingness to pay is an appropriate measure of individual well-being. He cites Paul Dolan’s definition of well-being as including both feelings of pleasure and feelings of purpose. Sunstein argues that measuring this subjective well-being directly would be preferable to using monetary estimates, given that improving welfare is the ultimate goal. Researchers are making substantial progress in this area, as discussed in the <em>Journal of Benefit-Cost Analysis</em> special issue on “<a href="https://www.cambridge.org/core/journals/journal-of-benefit-cost-analysis/issue/9DB06A5F72A091C1A63A5FFDF7D136BF">[Ir]rationality, Happiness, and Benefit-Cost Analysis</a>.” However, more work is needed to map subjective well-being measures to policy consequences. Sunstein argues that willingness to pay provides the most practical approach currently.</p>
<p>More generally, a lack of knowledge can pose significant challenges to the use of benefit-cost analysis, which is driven by evidence, facts, and figures. Sunstein notes that this problem can be addressed in part by soliciting public comment, as is required for U.S. regulatory proposals. Sunstein also emphasizes the importance of retrospective review of regulatory costs and benefits to increase our understanding of policy impacts.</p>
<p>In the second part of the book, Sunstein discusses five diverse areas where more work is needed to improve the use of benefit-cost analysis and clarify its role. First, he argues that we need to better understand how much individuals are willing to pay for moral commitments, such as knowing that tuna is “dolphin safe,” regardless of whether the impact is physical or psychological. Second, he suggests we need to further explore the positive and negative impacts of mandatory labeling. Third is the role of benefit-cost analysis in protecting agencies against charges of acting arbitrarily when regulatory decisions are litigated. The fourth issue is how to protect ourselves from taking overly aggressive precautions against perceived risks, particularly in national security and privacy policies. The fifth is free speech; the question is whether it should be subject to the same type of benefit-cost balancing as other policy concerns or should be treated differently.</p>
<p>In each of these five areas, Sunstein identifies research needs and recognizes that a fully quantified benefit-cost analysis is not always feasible. Yet analysis of the positive and negative consequences of policy choices is still useful. Where full quantification is not possible, he indicates that agencies should provide quantitative information to the extent possible, conduct breakeven analysis to identify how large the unquantified effects would need to be to lead to positive net benefits, and discuss the impacts qualitatively.</p>
<p>While Sunstein clearly understands the challenges analysts and decision-makers face and argues thoughtfully and persuasively, in a few cases he may be too sanguine about the current state of the art. One such case relates to distributional impacts, an issue with which Sunstein is deeply concerned. &nbsp;He argues that, in his experience, regulations with positive net benefits rarely have undesirable distributional effects. While this seems reasonable on the surface, it is also a strong claim. My <a href="https://academic.oup.com/reep/article-abstract/10/2/308/2241004">work</a> with James K. Hammitt and Richard J. Zeckhauser suggests that agencies rarely assess regulations’ distributional effects and focus overly much on benefits – without also considering the distribution of costs. More work is needed to demonstrate the extent to which distributional concerns arise when the aggregate net impact of the policy is positive.</p>
<p>Another area where Sunstein may be overly sanguine relates to retrospective analysis. As he indicates, such analysis is incredibly important in deciding whether to alter current regulations and in designing future regulations, as well as in improving the practice of benefit-cost analysis. However, it is also <a href="https://www.cambridge.org/core/journals/journal-of-benefit-cost-analysis/article/retrospective-analyses-are-hard-a-cautionary-tale-from-epas-air-toxics-regulations/A477A12DED113B63DF8311AED1DAC27E">incredibly difficult</a>. Separating out the impacts of the regulation from the impacts of other historical trends and events is challenging; continued work on refining the methods used in these assessments is essential.</p>
<p>As always, Professor Sunstein thinks deeply, writes engagingly, and is often provocative. It is no wonder that he is one of the most cited legal scholars in the U.S. He has inspired innumerable researchers and policymakers to consider how human psychology influences decisions and ultimately welfare. This research has in turn led to much interesting discussion of how these issues affect the conduct of benefit-cost analysis, such as our initial work on <a href="https://www.cambridge.org/core/journals/journal-of-benefit-cost-analysis/article/behavioral-economics-and-the-conduct-of-benefitcost-analysis-towards-principles-and-standards/AE95E205CB02820CB84019A7629686D0">developing principles and standards</a> and a more recent <a href="https://benefitcostanalysis.org/balance-review-behavioral-economics-cost-benefit-analysis-david-l-weimer">comprehensive text</a> by former SBCA President David Weimer. While readers may disagree with Sunstein’s arguments from a normative or a practical perspective, anyone who works in this area will find this book intriguing; it both celebrates our successes and poses important challenges. It is likely to lead to much interesting debate as well as to new developments in the field.</p>
<p><em>Lisa A. Robinson</em><em>&nbsp;is a Senior Research Scientist at the Harvard T.H. Chan School of Public Health, where she is affiliated with the Center for Health Decision Science and the Center for Risk Analysis. A previous Society for Benefit-Cost Analysis President, Ms. Robinson has been active in the Society and the Journal of Benefit-Cost Analysis since their inception.</em></p>
<p><em>Note from the President: We are pleased to welcome Professor Sunstein as the keynote speaker at the upcoming <a href="http://benefitcostanalysis.org/">SBCA 2019 conference</a>. </em></p>
</div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/balance" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">On Balance</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/blog" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Blog</a></div></div></div>Tue, 08 Jan 2019 18:49:42 +0000drohanmgmt304 at http://benefitcostanalysis.orghttp://benefitcostanalysis.org/balance-review-cost-benefit-revolution-cass-r-sunstein#commentsOn Balance: Two quick fix solutions to baseline estimation challenges: good enough for practical analysis? http://benefitcostanalysis.org/balance-two-quick-fix-solutions-baseline-estimation-challenges-good-enough-practical-analysis
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p><img style="height: 97px; width: 130px; float: left;" class="media-element file-default" data-delta="1" typeof="foaf:Image" src="http://www.benefitcostanalysis.org/sites/default/files/Headshot.PNG" width="428" height="319" alt="" />&nbsp;December 12, 2018</p>
<p>&nbsp;<em>By Joe Devlin</em></p>
<p>&nbsp;Since 2010, I have been a practitioner of practical benefit-cost analysis at Environment and Climate Change Canada (ECCC), working with colleagues to inform policymakers and stakeholders about the likely impacts of proposed federal environmental regulations. I would like to examine a key issue in developing estimates of the benefits and costs of these regulations: the development of the baseline in a benefit-cost analysis.</p>
<p>In recent years, a number of articles in the <em>Journal of Benefit Cost Analysis</em> have addressed the question of how best to conduct—and evaluate—a regulatory benefit-cost analysis. Two of these subsequently resulted in posts to <em>On Balance</em>: <a href="https://benefitcostanalysis.org/balance-consumers-guide-regulatory-impact-analysis">Consumers Guide to Regulatory Impact Analysis</a>, by Susan Dudley, and <a href="https://benefitcostanalysis.org/balance-two-decades-benefits-and-costs-promise-and-pitfalls">Two Decades of Benefits and Costs: Promise and Pitfalls</a>, by Clark Nardinelli. Another article by Richard Morganstern, <a href="https://doi.org/10.1017/bca.2017.17">Retrospective Analysis of U.S. Federal Environmental Regulation</a>, examines various estimates for environmental rules and analyzes issues relevant to developing credible baselines.</p>
<p>These articles remind us that baselines in a regulatory impact analysis can be slippery: in estimating benefits and costs the comparison is not between <em>before-and-after</em> regulation but between a <em>counterfactual with-and-without</em> regulation. In turn, the “counterfactual” should take into account the effect of other regulations, the evolution of the market in the absence of regulation, and other external factors. In short: developing this counterfactual requires understanding how the baseline has been changing and how it is likely to change.</p>
<p>We do our best to develop reasonable counterfactuals but it is not easy. Two examples from my experience illustrate how hard it can be. I present them here for comments and responses to open questions about our procedures.</p>
<p>My first example is what we (in Canada) call “Tier3” standards, which include lower limits on the sulphur content of gasoline and stricter limits on air pollutant emissions from new passenger cars, light-duty trucks and certain heavy-duty vehicles. These regulations, published in 2014, were accompanied by a <a href="http://www.gazette.gc.ca/rp-pr/p1/2014/2014-09-27/html/reg1-eng.html">Regulatory Impact Analysis.</a>&nbsp;The analysis employed a sophisticated, multi-stage approach to estimating changes in emissions, their impacts on air quality, and the effects and value of changes in air quality on the health and environment of Canadians.</p>
<p>Given the analytical complexity, we did not fully model either the base or the policy case. Instead, we modelled the annual emission trends, then picked two representative years (2020 and 2030) and completed the full multi-stage air quality and benefits modelling for those years. Intervening years were interpolated linearly. Admittedly, this is a somewhat heroic assumption, as few natural processes move in a straight line and changes in air emissions may have counter-intuitive results for changes in ambient air quality and health outcomes.</p>
<p><em>Is it better to oversimplify or to avoid representing how the world is changing? Different agencies have answered this question differently; how would you?</em></p>
<p>My second example involves regulations designed to reduce greenhouse gas (GHG) emissions from on-road vehicles: both “light-duty” vehicles such as passenger cars, pick-up trucks, and vans; and “heavy-duty” vehicles such as heavier cars and trucks, commercial vans, buses, and tractor-trailers. The most recent version, <a href="http://www.gazette.gc.ca/rp-pr/p2/2018/2018-05-30/html/sor-dors98-eng.html">Regulations Amending the Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations,</a>&nbsp;were published in May 2018, also accompanied by a Regulatory Impact Analysis. Baseline emissions in this analysis were taken from the most recent ECCC projected GHG emissions given existing policies and trends, and incorporated the latest available set of economic and energy projections. This baseline assumed, for the most part, that vehicle technologies affecting GHG emissions will remain essentially unchanged over the analytical time frame, in the absence of new regulations. Thus, emissions in the baseline may not fully reflect changes in emissions that might occur due to technological changes that could occur in the market in the absence of any regulations. We find that net benefits for Canadians under the proposed policy are positive, although we state that net benefits might be lower than stated under some forms of technological change.</p>
<p>Projecting how potential technology change and market forces might affect emissions over time, in the absence of new regulation, is difficult to do. Thus, it is equally difficult to determine whether the omission of technological change might cause us to over- or under-estimate the true cost-effectiveness of the policy. Moreover, policymakers and stakeholders care about the scale of net impacts, so our reassurances of net benefits under any baseline estimate of natural technology adoption may not be fully satisfactory to those who are looking for a compelling result to justify regulatory intervention.</p>
<p><em>Are these reasons enough to abandon our assumption that technology will not change (much) in the baseline? Forecasting technology changes and costs is difficult and we feel this assumption is transparent enough and easily understood by policymakers; what do you think?</em></p>
<p>I ask readers to consider my examples and feel free to provide some feedback or further insights because I believe that the only way to avoid pitfalls is constant vigilance; an ongoing effort is necessary if we are to serve the policymakers and stakeholders who rely on our regulatory analyses. You can contact me directly at <a href="mailto:Joe.devlin@canada.ca">Joe.devlin@canada.ca</a></p>
<p><em>Joe Devlin is a senior economist at Environment and Climate Change Canada (ECCC). Joe manages a team of economists who use benefit-cost analysis to evaluate a range of environmental regulations addressing air quality, climate change and chemical management.</em></p>
<p>&nbsp;</p>
</div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/balance" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">On Balance</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/blog" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Blog</a></div></div></div>Wed, 12 Dec 2018 15:06:29 +0000drohanmgmt303 at http://benefitcostanalysis.orghttp://benefitcostanalysis.org/balance-two-quick-fix-solutions-baseline-estimation-challenges-good-enough-practical-analysis#commentsOn Balance: Using Cost-Benefit Analysis to Make the World a Better Placehttp://benefitcostanalysis.org/balance-using-cost-benefit-analysis-make-world-better-place
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p><img style="height: 150px; width: 100px; float: left;" class="media-element file-default" data-delta="2" typeof="foaf:Image" src="http://benefitcostanalysis.org/sites/default/files/Headshot.JPG" width="549" height="823" alt="" />&nbsp;November 28, 2018</p>
<p><em>&nbsp;By Brad Wong</em></p>
<p>&nbsp;If you had billions of dollars to make the world a better place, and could spend it however you wanted, how would you <strong>maximize</strong> your impact? This is not just a thought experiment, but a daily concern for the world’s governments, philanthropists, and multilateral institutions. Since 2004, <a href="https://www.copenhagenconsensus.com/">Copenhagen Consensus</a>&nbsp;has been using cost-benefit analysis to help decision makers identify highly effective interventions. While most cost-benefit analysis seeks the best solution for a single problem, Copenhagen Consensus takes a wider view, looking across all major domains for policies that improve social welfare.</p>
<p>Our approach is, first, to identify smart ideas across 15 to 20 relevant policy domains by consulting widely in the region or country in which we’re working. This process typically generates more than a thousand ideas. An advisory council then whittles this list down to around 100—with preference given to ideas that are likely to be highly cost-effective or those backed with significant funding and political will. We then work with some of the world’s top economists to analyze the costs and benefits of these 100, insofar as data and other constraints permit.</p>
<p>Working with top economists is both a humbling and a rewarding experience, and coordinating across 20 to 30 teams requires vigilance to ensure that the teams follow the guidance we provide. One key challenge is ensuring that similar assumptions, such as discount rates or the value of mortality risk reductions, are used across analyses. We also try to ensure consistency in the underlying health, demographic and economic data. We also face significant challenges because the level of rigor possible and quality of evidence varies across disciplines. The only solution is to be very clear about the quality and source of data and evidence, accompanied by the appropriate caveats.</p>
<p>Moreover, different academic disciplines have built up ways of working and norms that are not necessarily compatible with those of other disciplines. For example, education economists, in calculating the returns to schooling, tend not to account for unemployment, labor force participation and wage growth, the idea being that the effects of these would roughly cancel each other out in say an analysis of primary vs. secondary education. However, these effects must be included when comparing primary education to rural roads or household sanitation, for example, because they cannot be assumed to cancel out in the same way.</p>
<p>A related challenge is encouraging researchers to estimate benefits not typically measured in their field. Agricultural economists tend to care most about yields and farmer profit. Poverty economists will generally measure the effects of interventions on consumption. However, it is reasonable to assume that both of these would have effects on health, which might be more highly valued than the market value of yield or consumption growth—producing a higher benefit-cost ratio (BCR). We’ve found the best approach is to bring together a multi-disciplinary team.</p>
<p>The research component takes around 12 to 15 months. At the conclusion, the research is summarized in a league table (ranking) of interventions based on the BCR. A panel of eminent economists, usually including Nobel Laureates, studies the new research and prioritizes the interventions, based on the cost-benefit results and their own insights and judgements. This prioritized list and the league table are presented to decision makers, who are encouraged to implement those towards the top of the list.</p>
<p>Below is an example of the top interventions by BCR in nutrition, electricity, and energy from our project in Haiti, sponsored by the government of Canada (the full chart of 85 interventions is <a href="https://www.copenhagenconsensus.com/sites/default/files/hp_brochure_en.pdf">here</a>). A similar graph could also feature net benefits, but we focus on BCR since developing countries tend to be acutely resource constrained both in terms of money and management attention, and any new interventions are likely to displace existing ones. However, we make sure that interventions reach a minimum size threshold so that very small projects that might have artificially high BCRs are not considered. The <a href="https://www.copenhagenconsensus.com/sites/default/files/haiti_priorise_nutrition_-_english.pdf">report on Preventative Nutrition Interventions for Haiti, by Reina Engle-Stone and co-authors</a>, found that wheat flour fortification was the highest ranked intervention, with a BCR of 24.</p>
<p><img style="width: 650px; height: 219px;" class="media-element file-default" data-delta="3" typeof="foaf:Image" src="http://benefitcostanalysis.org/sites/default/files/Chart11.JPG" width="554" height="162" alt="" /></p>
<p>Although it is not the only factor determining priorities, this simple BCR chart can be compelling. It distils hundreds of pages of peer-reviewed research into one simple graph. When <a href="https://www.copenhagenconsensus.com/haiti-priorise/news/president-jovenel-moise-haiti-receives-haiti-priorise-outcome">we presented this to the President of Haiti</a>, Jovenel Moïse, his first reaction was surprise: it had not occurred to him that one of the most effective interventions for his country would be fortifying wheat with iron and folic acid.</p>
<p>In this particular case, wheat flour fortification had several advantages over other interventions. First, a significant portion of the population consumes wheat regularly; 40% of urban and 34% of rural Haitians indicate they eat bread 3-4 times per week. Second, only a handful of flour millers process almost all of the wheat consumed in the country, and the fortification powder is relatively inexpensive.</p>
<p>Third, the problems addressed by the intervention – anemia and neural tube defects – are very prevalent in Haiti. About half of Haitian women and children are anemic and the rate of neural tube defects is 3-4 times higher than the rate with full coverage of folic acid.</p>
<p>Consequently, wheat flour fortification is particularly compelling for Haiti because only two or three entry points are needed to address a wide-spread health problem, and people do not need to change their behavior to generate the benefits. After seeing the results, <a href="https://www.economist.com/the-americas/2017/06/08/a-possible-future-for-haiti">President Moïse promised to enact the intervention within six months</a>. It was subsequently <a href="https://ht.usembassy.gov/launch-food-fortification-project-ranfose-supported-usaid/">co-funded by the United States Agency for International Development (USAID)</a>&nbsp;with technical support from experts at University of California, Davis, some of whom had authored the <a href="https://www.copenhagenconsensus.com/sites/default/files/haiti_priorise_nutrition_-_english.pdf">Copenhagen Consensus report</a>.</p>
<p>Besides Haiti, Copenhagen Consensus has been able to convince governments across the world to enact more effective <a href="https://www.copenhagenconsensus.com/our-impact">policies</a>. For example, following our Bangladesh project in 2016, the government expanded e-procurement to all departments, in part based on the evidence of <a href="https://www.copenhagenconsensus.com/sites/default/files/abdahllah_e-procurement.pdf">our report</a>&nbsp;estimating the BCR of the intervention at a phenomenal 700 (Abdallah, 2017).</p>
<p>The Bangladesh project highlights an interesting and important insight from our multi-intervention cost-benefit research: the best interventions provide significantly more effective uses of a marginal dollar than the median intervention—by 1 to 3 <strong>orders of magnitude</strong>.</p>
<p>As another example, in <a href="https://www.copenhagenconsensus.com/sites/default/files/raj_brochure_v2.1.pdf">an exercise</a>&nbsp;we conducted in the state of Rajasthan in India, the top intervention—improved screening and treatment for tuberculosis—had a BCR of almost 180; the median intervention had a BCR of 4.5. Similarly dispersed distributions have been documented in cost-effectiveness reviews of <a href="https://www.cgdev.org/sites/default/files/1427016_file_moral_imperative_cost_effectiveness.pdf">health</a>&nbsp;and <a href="http://academics.wellesley.edu/Economics/mcewan/PDF/meta.pdf">education </a>interventions in the developing world (Ord, 2013; McEwan, 2015).</p>
<p><img class="media-element file-default" data-delta="4" typeof="foaf:Image" src="http://benefitcostanalysis.org/sites/default/files/Chart23.JPG" width="556" height="352" alt="" /></p>
<p>Source: <a href="https://www.copenhagenconsensus.com/rajasthan-priorities">Rajasthan Priorities project</a>. Red bar represents median intervention with BCR of 4.5.</p>
<p>What are the implications of the wide range in BCRs across interventions? Oxford philosopher Toby Ord has noted in a 2013 essay, “<a href="https://www.cgdev.org/publication/moral-imperative-toward-cost-effectiveness-global-health">The Moral Imperative Toward Global Cost-effectiveness in Global Health</a>,” that it is critical to identify the outliers and push for their implementation (Ord, 2013). Such an approach is likely to be better than making incremental improvements in existing spending. For example, if the average intervention in a policy space has, say, a BCR of five and the most effective intervention possible is 500, doubling the efficiency of 99% of funds under control would deliver as much social good as shifting 1% of funds to the most effective intervention available.</p>
<p>Copenhagen Consensus approaches research with a mission of maximizing social welfare. Thus, it is important for us to do as many cost-benefit analyses as possible – usually more than 75 per project – to increase the likelihood that we identify an outlier. Overall, we hope that we inject useful information into the policy space, and provide information that is usually absent where it is needed most.</p>
<p>We are constantly looking for more ways to collaborate with the community of cost-benefit analysts, so please drop me a line if you’d like to know more: <a href="mailto:brad@copenhagenconsensus.com">brad@copenhagenconsensus.com</a></p>
<p><em>Brad Wong is the Chief Economist of the Copenhagen Consensus Center,&nbsp;where he works with some of the world’s leading economists to undertake cost-benefit analyses across various disciplines of international development. He is also a member of the advisory board for the Guidelines for Benefit-Cost Analysis <a href="https://sites.sph.harvard.edu/bcaguidelines/">project</a>.</em></p>
<p><strong>References</strong></p>
<ul>
<li>Abdallah, Wahid. 2017. “Electronic Public Procurement in Bangladesh” in <em>Bangladesh Priorities: Helping Make Vision 2021 a Reality </em>ed. Bjorn Lomborg and Mahfuzar Rahman, BRAC University Press, Dhaka</li>
<li>McEwan, Patrick J. 2015. “Improving Learning in Primary Schools of Developing Countries: A Meta-analysis of Randomized Experiments.” <em>Review of Education Research</em>, 85(3): 353-394</li>
</ul>
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</div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/balance" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">On Balance</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/blog" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Blog</a></div></div></div>Tue, 27 Nov 2018 19:50:19 +0000drohanmgmt302 at http://benefitcostanalysis.orghttp://benefitcostanalysis.org/balance-using-cost-benefit-analysis-make-world-better-place#commentsOn Balance: Nudging Electricity Consumptionhttp://benefitcostanalysis.org/balance-nudging-electricity-consumption
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p><img style="width: 100px; height: 100px; float: left;" class="media-element file-default" data-delta="1" typeof="foaf:Image" src="http://benefitcostanalysis.org/sites/default/files/Headshot.jpg" width="600" height="600" alt="" />&nbsp;November 14, 2018</p>
<p><em>&nbsp;By Thomas J. Kniesner and Galib Rustamov</em></p>
<p>&nbsp;Nudges are all the rage in behavioral economics and public policy applications around the world because of their potential for doing good at little or no cost. Economists, including Kip Viscusi (2018), have begun examining previously unexplored sides of nudges including some involving energy consumption. An often employed nudge in the area of conserving energy and reducing pollution is the home energy report, where after a home energy survey a household receives a message, usually monthly, that compares its energy use to that of neighbors and suggests ways to reduce electric or gas use and, in turn, its carbon footprint. Each month the consuming unit can also see how its energy use compares to its own past usage too. The subtleties of the benefits of home energy surveys and home energy reports is the subject of a recent article, "<a href="https://www.cambridge.org/core/journals/journal-of-benefit-cost-analysis/article/differential-and-distributional-effects-of-energy-efficiency-surveys-evidence-from-electricity-consumption/543329FFEDB0B2E433BF3D6F2F8E3BD5">Differential and Distributional Effects of Energy Efficiency Surveys: Evidence from Electricity Consumption</a>," available open access at the Journal of Benefit-Cost Analysis.</p>
<p>Nobel Laureate in Economic Sciences, Sir Angus Deaton (2018), has emphasized the importance of moving beyond only the mean differences revealed in the “gold standard” random controlled trials and recommended other statistical setups to consider effect heterogeneity including intervention distribution effects, such as how the treatment effect differs by predicted outcome quantile. The particular intervention my co-author, Dr. Galib Rustamov, and I investigated involves about 4200 customers of an Investor Owned Utility in California who voluntarily participated in a Home Energy Effectiveness Survey in January 2009 and January 2010. In addition to energy use the survey contained more than 130 questions, including household size, income, house size, and energy using/saving behavior and appliances. The comparison group contained customers who did not participate in the surveys then but would voluntarily participate in subsequent years. Our estimation procedures included quantile difference-in-differences propensity score matching regressions of two years of monthly energy consumption.</p>
<p>Our best estimate is that one year after beginning participation, participating customers reduced their monthly electricity consumption by about 7% on average, when compared to households who did not participate in the survey but would do so in a later program. Because of the low one-time cost of the survey (about $12 per customer), compared to an on-going annual benefit of $144 per customer in electricity savings, the nudge we studied passes a simple benefit-cost test.</p>
<p>Moreover, nudges are often used to deal with so-called internalities whereby they help people make better decisions as judged by their own self-interest (in this case, reduced electric bills). However, our results also show reduced externalities, which make a benefit-cost calculation more striking. Based on our estimates, the program participants for the year 2009 reduced monthly emissions by over 1500 metric tons of carbon dioxide, which lowered the social cost of electricity production by about $32,000 per month.</p>
<p>Finally, we examined the differential energy use effects of the Home Energy Efficiency Survey nudge by income and pre-nudge energy use. Our results showed that the program studied led to proportionately more electricity saving among low income/electricity use households than among high-use households.</p>
<p>Issues that we did not address but would be good topics for future research concern finding more of the details of how the low income households used proportionately less energy and taking a deeper dive into why high use/income households who may have the most slack in energy use to adjust and who are the most highly educated did proportionately less to reduce energy use.</p>
<p><em>Dr. Thomas J. Kniesner is University Professor and Chair of the Department of Economic Sciences at the Claremont Graduate University. He is a former Senior Economist on the staff of the President’s Council of Economic Advisers, a Research Fellow at IZA, a member of the National Academy of Social Insurance, and a member of the Board of the Society for Benefit Cost Analysis.</em></p>
<p><strong><em>Disclosure:</em></strong><em> In addition to his position as Adjunct Assistant Professor at the Claremont Graduate University, article co-author, Dr. Galib Rustamov, is currently an employee of Southern California Edison, where he is an Advisor for Measurement and Evaluation. The article was completed before he began his position there.</em></p>
<p><strong>References</strong></p>
<ul>
<li>Deaton, A and Cartwright, N., “Understanding and Misunderstanding Randomized Controlled Trials,” <em>Social Science &amp; Medicine</em>, 210 (2018): 2-21.</li>
<li>Viscusi, W.K., “Efficiency Criteria for Nudges and Norms,” Vanderbilt Law School, October 8, 2018<em>.</em></li>
</ul>
</div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/balance" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">On Balance</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/blog" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Blog</a></div></div></div>Tue, 13 Nov 2018 14:12:17 +0000drohanmgmt300 at http://benefitcostanalysis.orgOn Balance: Review of "Cost Benefit Analysis" by Per Olov Johansson and Bengt Kristromhttp://benefitcostanalysis.org/balance-review-cost-benefit-analysis-olov-johansson-and-bengt-kristrom
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p><img style="float: left;" class="media-element file-default" data-delta="1" typeof="foaf:Image" src="http://benefitcostanalysis.org/sites/default/files/Quinet.JPG" width="87" height="115" alt="" />&nbsp; &nbsp;October 24, 2018</p>
<p><em>&nbsp; &nbsp;By Emile Quinet</em></p>
<p>&nbsp; &nbsp;Cambridge Elements has created a series on <a href="https://www.cambridge.org/us/academic/elements/public-economics">Public Economics</a>, edited by Robin Boadway, Frank Cowell and Massimo Florio. This is part of a major project by Cambridge University Press, which is intended to provide peer-reviewed analytical surveys and frontier topics in all the disciplines. We happily note that the first published “Element” in this series is <em>Cost Benefit Analysis</em>, by Per-Olov Johansson and Bengt Kriström (2018). <em>Cost-Benefit Analysis</em> <a href="https://www.cambridge.org/core/elements/costbenefit-analysis/CF50007908ABBA50D561517807E5E9D2">is available as a free download</a>&nbsp;for a limited time, and is for sale (relatively inexpensively) in print at Cambridge and at online booksellers, such as Barnes and Noble. The Element is just above eighty pages (plus a short technical annex and a long list of references).</p>
<p>Encompassing the whole of Cost-Benefit Analysis in such a reduced volume is a tour de force, as acknowledged by the authors in the prologue. The aim is to provide a comprehensive and non-technical state of the art overview of Cost-Benefit Analysis, including both basic classical results and some new frontiers. It has been successfully reached.</p>
<p>The authors’ task is made easier by a book they co-authored in 2015, <a href="https://www.cambridge.org/gb/academic/subjects/economics/public-economics-and-public-policy/cost-benefit-analysis-project-appraisal?format=PB"><em>Cost Benefit Analysis for Project Appraisal</em></a><em>,</em> which was about three times as long as the Element. While of course the authors build on this source, the Element has several differentiating features.</p>
<p>First, the 2015 book was limited to project appraisal, a focus well in line with European concerns, where cost-benefit analysis has long been applied to infrastructure investments, especially investments in transport and environmental services. The Element has a broader scope and may capture a wider audience, particularly in the United States, where cost-benefit analysis has been used not only to assess investments, but also in evaluating regulations, as a result of the <a href="https://www.archives.gov/files/federal-register/executive-orders/pdf/12866.pdf">Executive Order (EO) 12866</a>, which imposes “…an assessment of all costs and benefits of available regulatory alternatives, including the alternative of not regulating.” (See also a recent <em>On Balance</em> <a href="https://benefitcostanalysis.org/balance-reflecting-longevity-executive-order-12866-and-looking-future">post </a>by Clark Nardinelli and Susan Dudley.)</p>
<p>Second, in contrast to the earlier book, the use of mathematical equations is relatively limited in this Element, which is nontechnical and instead mainly uses simple graphs and literal explanation. The authors address many tricky issues, such as market power or cost of public funds, in simple and transparent ways. For each of these complicated issues, examples are provided to make the spirit of the concept or of the mechanism understood, and are supported by numerous references. Many of these references come from Nordic countries, especially Sweden, and serve also to highlight the achievements of Swedish economists.</p>
<p>Following a Prologue (Section 1) and Introduction (Section 2), the Element is divided into five sections. Section 3, entitled Basic Rules, deals with classical issues, starting from the Dupuit surplus (now known as consumers’ surplus) in a single market, and extending the discussion to multiple markets, including the case of foreign exchanges. The authors then broaden the discussion to include public goods and externalities, non-use values, paternalism and altruism, and, finally, tradable permits, market powers, and market imbalances.</p>
<p>Section 4 deals with discounting and distributional issues; distributional issues are rightly emphasized, as they are often omitted by practitioners. The authors do a good job linking theory to practice, and explaining how the first can be of use for the second; the same can be said for their discussion of the cost of capital.</p>
<p>In Section 5, the authors develop the distinction between large and small projects. This development is largely built on the chapter on same subject in their 2015 book. It is in my view one of the most interesting contributions of the book, pointing to a rarely addressed issue: linking sound theoretical considerations to the implications for practical implementation. This section also includes a discussion of the caveats associated with transferring values from one study to another, which should be read by all practitioners. It also addresses risk issues, and provides an interesting and short presentation on the value of flexibility.</p>
<p>Section 6 deals with valuation of non-market goods. Here the authors cover rather technical developments that will be difficult for non-specialists to understand. However, they do provide broad views and interesting comparisons of different empirical approaches to valuing non-market goods (including the household production function approach).</p>
<p>In Section 7, the authors deepen some previous points. For instance, they come back to the distinction between small and large projects; they compare numerical simulations of three different methods for large project appraisal, leading to impressive discrepancies and showing how easy it is to make mistakes in this field. They also report some developments on the value of statistical life. While these topics are quite interesting, it is unclear why they, in particular, are presented rather than other equally interesting ones.</p>
<p>The authors’ ability to address classic topics in a simple illustrative manner that nevertheless leads to very penetrating conclusions is the mark of their deep understanding of the matter. I especially appreciated the useful guidance they provide for the practitioner: for instance, how to take into account ad valorem taxes—depending on demand elasticities—or how to take into account imbalances in the labor market—an especially difficult and important issue.</p>
<p>Just a regret: the book does not deal with the issue of decision criteria in investment appraisal; it gives some hints on the optimal timing of investment (in the section on distributional issues), but does not address the full problem of optimal programming. Nor do the authors give any indication of how to use the usual indicators (such as net present value, internal rate of return), even though this is a subject of major interest for practitioners, and is rarely addressed by books on cost-benefit analysis.</p>
<p>On the whole, the authors demonstrate an enviable ability to explain concepts and mechanisms with very simple sentences and examples. They do not hesitate to return to the definition of rather basic concepts, such as externalities, or public goods, using enlightening illustrations. They introduce more refined concepts with short sentences. I was especially struck by their elegant and concise way of introducing risk: “In order to be able to say anything meaningful about attitudes toward risk we must assume that the utility function is concave or convex. Concavity or convexity of a function is a cardinal property. Therefore we now leave the ordinal world….”</p>
<p>While laudable, the use of words without mathematical or technical apparatus has its limits and raises the question, “will this book be understood by the reader who has no background in economics?” It is probable that non-specialists will pick up the general meaning of the definitions, but sure that they will not fully understand all the subtleties in this book, which is short in length but long to read, and which is like a diamond: splendid and hard.</p>
<p>Rather, the audience for this book is likely to be the graduate student of economics who plans to specialize in cost-benefit analysis. Practitioners, especially consultants and those in government, will find deep insights on difficult matters rarely addressed in official guidelines. These readers will find in this book a systematic overview of all important themes of cost-benefit analysis and many references facilitating a deeper understanding of the topics. And specialists of all types will find much food for thought.</p>
<p><em>Emile Quinet is associate member of Paris School of Economics and emeritus professor at Ecole des ponts-ParisTech. He is specialized in transportation and Cost Benefit Analysis. He is the author of several reports to the French Government on Cost Benefit Analysis guidances.</em></p>
<p><strong>References</strong></p>
<ul>
<li><em>Johansson, P., &amp; Kriström, B. (2018). Cost–Benefit Analysis (Elements in Public Economics). Cambridge: Cambridge University Press. doi:10.1017/9781108660624</em></li>
<li><em>Johansson, P., &amp; Kriström, B. (2015). Cost-Benefit Analysis for Project Appraisal. Cambridge: Cambridge University Press. doi:10.1017/CBO9781316392751</em></li>
</ul>
</div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/balance" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">On Balance</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/blog" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Blog</a></div></div></div>Fri, 19 Oct 2018 17:55:53 +0000drohanmgmt299 at http://benefitcostanalysis.orgOn Balance: Executive Order 12866 and the Durability of Core Regulatory Principleshttp://benefitcostanalysis.org/balance-executive-order-12866-and-durability-core-regulatory-principles
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p><img style="height: 130px; width: 110px; float: left;" class="media-element file-default" data-delta="1" typeof="foaf:Image" src="http://benefitcostanalysis.org/sites/default/files/Febrizio%20Picture.PNG" width="320" height="481" alt="" />&nbsp;October 10, 2018</p>
<p><em>&nbsp;By Mark Febrizio</em></p>
<p>&nbsp;On September 24, 2018, experts <a href="https://regulatorystudies.columbian.gwu.edu/celebrating-25-years-eo-12866">gathered at the George Washington University&nbsp;</a>(GW) to commemorate the 25<sup>th</sup> anniversary of <a href="https://www.archives.gov/files/federal-register/executive-orders/pdf/12866.pdf">Executive Order (E.O.) 12866</a>—<em>Regulatory Planning and Review</em>—and discuss the implications of its provisions and future prospects. The <a href="https://benefitcostanalysis.org/">Society for Benefit-Cost Analysis</a>&nbsp;(SBCA) cosponsored the event with the <a href="https://regulatorystudies.columbian.gwu.edu/">GW Regulatory Studies Center</a>, <a href="https://www.americanbar.org/groups/administrative_law.html">ABA Section of Administrative Law and Regulatory Practice</a>, and the <a href="https://tspppa.gwu.edu/">Trachtenberg School of Public Policy and Public Administration</a>. (Additional information on the event, including commentaries by the speakers, and videos when they become available, are posted on the <a href="https://regulatorystudies.columbian.gwu.edu/celebrating-25-years-eo-12866">GW website</a>.)</p>
<p>The E.O., which President Clinton signed in 1993, expanded on previous executive orders requiring benefit-cost analysis and formalized the principles of regulation and centralized review procedures that still guide the rulemaking process (see also an earlier <a href="https://benefitcostanalysis.org/balance-reflecting-longevity-executive-order-12866-and-looking-future">“On Balance” post</a>, written by Susan Dudley and Clark Nardinelli, which preceded the event). The three panels highlighted insights from government experts, scholars, and past and present administrators of the Office of Information and Regulatory Affairs (OIRA) responsible for applying the order’s principles under presidents Clinton, Bush, Obama, and Trump. The most significant theme that emerged from each panel was the durability of E.O. 12866’s principles and process—both across administrations and over time.</p>
<p>Bridget Dooling (GW Regulatory Studies Center), a former senior staff member at OIRA, moderated the first panel, which looked back on the past 25 years. The panel consisted of three OIRA administrators from each previous presidential administration, along with two regulatory experts at federal agencies.</p>
<p>Sally Katzen (NYU Law School), who oversaw the drafting of E.O. 12866 as OIRA Administrator under Clinton, attributed the longevity of the order to both the substantive principles contained in the document and the process used to engage stakeholders across several drafts of the document. Clark Nardinelli, Chief Economist at the Food and Drug Administration, expounded on the substantive contributions of the order—particularly the document’s 12 principles of regulation.</p>
<p>These principles established <a href="https://www.reginfo.gov/public/jsp/Utilities/a-4.pdf">best practices</a>, including identifying the problem to address, evaluating alternative approaches, and assessing benefits and costs to inform construction of cost-effective regulations. Following these best practices has increased the quality of regulatory analysis, improved coordination and cooperation among agencies and OIRA, and mitigated interagency disputes. Panelists pointed out that the order expanded the role of economists in the rulemaking process and reduced reliance on other frameworks that might reduce innovation and competition, such as adopting a precautionary principle in evaluating new technologies and innovations.</p>
<p>Shawne McGibbon, General Counsel of the Administrative Conference of the United States, moderated the second panel, which offered legislative perspectives on the order. Panelists focused on the importance of E.O. 12866’s interaction with legislative actions and how the order’s principles supplemented the notice-and-comment provisions in the <a href="https://www.epa.gov/laws-regulations/summary-administrative-procedure-act">Administrative Procedure Act of 1946</a>. The bipartisan and bicameral congressional staff on the panel explained how the order helps generate products closer to congressional intent and often avoids the need to exercise the <a href="https://www.gao.gov/legal/other-legal-work/congressional-review-act">Congressional Review Act of 1996</a>. As one speaker pointed out, higher quality products from agencies ultimately make Congress's job easier.</p>
<p>The third panel centered on the future of OIRA review, offering both a detailed look at how OIRA review works in practice and potential changes to the review process. Current OIRA Administrator, Neomi Rao, observed that the order required “regulatory humility” by obliging regulators to identify a compelling public need for regulation and to think about what can actually be accomplished by government action. In the same vein, Susan Dudley (GW Regulatory Studies Center), a former OIRA Administrator, encouraged regulators to consider the ability of competition and innovation to increase societal welfare, especially as technology advances at an accelerating pace.</p>
<p>Closely tied to regulatory humility is the importance of retrospective review: looking back and evaluating the effectiveness of existing regulations. Panelists described the interaction between <em>ex ante</em> and <em>ex post</em> analysis (particularly how agencies can use <em>ex post</em> review to verify their <em>ex ante</em> assumptions), and they offered practical suggestions on how to orient new regulations for future retrospective reviews. (The topic of regulatory review has been extensively discussed by scholars at the GW Regulatory Studies Center—see for example, commentary by <a href="https://regulatorystudies.columbian.gwu.edu/pitching-retrospective-review-cure-regulatory-accumulation">Sofie E. Miller</a>—and in&nbsp; recent articles in the Journal of Benefit Cost Analysis (JBCA) by <a href="https://www.cambridge.org/core/journals/journal-of-benefit-cost-analysis/article/retrospective-analysis-of-us-federal-environmental-regulation/891E36D3DBCEB79C969278488E5E1897">Richard Morgenstern</a>&nbsp;and by <a href="https://www.cambridge.org/core/journals/journal-of-benefit-cost-analysis/article/retrospective-analyses-are-hard-a-cautionary-tale-from-epas-air-toxics-regulations/A477A12DED113B63DF8311AED1DAC27E">Art Fraas and Alex Egorenkov</a>.)</p>
<p>Some disagreements emerged, such as over the Trump administration’s <a href="https://www.federalregister.gov/documents/2017/02/03/2017-02451/reducing-regulation-and-controlling-regulatory-costs">E.O. 13771</a>, which established a one-in-two-out standard for new regulations and imposed a regulatory budget constraint. (This rule has been extensively discussed in many fora; see for example, commentary by GW scholars <a href="https://regulatorystudies.columbian.gwu.edu/devil-details-president-trump%E2%80%99s-regulatory-executive-order">Sofie E. Miller and Susan E. Dudley</a>&nbsp;and a recent article by <a href="https://www.cambridge.org/core/journals/journal-of-benefit-cost-analysis/article/one-step-forward-two-steps-back-the-new-us-regulatory-budgeting-rules-in-light-of-the-international-experience/450A8B7237E0BB3782A095D1E20FDE92">Andrea Renda</a>&nbsp;in the JBCA). Nevertheless, fundamental agreement was clearly evident for certain issues, including the benefits of extending E.O. 12866 to independent regulatory agencies. In addition, remarks by OIRA administrators, past and present, consistently indicated strong support for E.O. 12866 and its principles, regardless of an administration’s policy goals.</p>
<p>While regulatory policy has changed and developed over the past 25 years, E.O. 12866 has remained of central importance to the regulatory process. Assembling an array of experts from different presidential administrations, federal agencies, and branches of government, the event underscored the possibility of genuine bipartisan agreement when process and principles are carefully established and applied. Simply put, the document’s underlying principles are the key to its durability and longevity. As regulatory practitioners and experts continue to adapt to the changing economic, technological, and political landscape, considering how to best expand E.O. 12866’s legacy will be essential to producing beneficial outcomes.</p>
<p><em>Note: An expanded version of this post to “On Balance” was written by Mark Febrizio, Daniel R. Pérez, and Zhoudan Xie. “25 Years of E.O. 12866 - Reg Studies Reflection,” can be found on the <a href="https://regulatorystudies.columbian.gwu.edu/25-years-eo-12866-reg-studies-reflection">GW website</a></em><a href="https://regulatorystudies.columbian.gwu.edu/25-years-eo-12866-reg-studies-reflection"><em>. </em></a></p>
<p><em>Mark Febrizio is a policy analyst at the George Washington University Regulatory Studies Center. Previously, he was a graduate research fellow at the Mercatus Center at George Mason University.</em></p>
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</div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/balance" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">On Balance</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/blog" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Blog</a></div></div></div>Wed, 10 Oct 2018 14:35:16 +0000drohanmgmt298 at http://benefitcostanalysis.orgOn Balance: Two Decades of Benefits and Costs: Promise and Pitfallshttp://benefitcostanalysis.org/balance-two-decades-benefits-and-costs-promise-and-pitfalls
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p><img style="height: 110px; width: 130px; float: left;" class="media-element file-default" data-delta="1" typeof="foaf:Image" src="http://benefitcostanalysis.org/sites/default/files/Clark.Nardinelli.jpg" width="1473" height="1415" alt="" />&nbsp;September 12, 2018</p>
<p><em>&nbsp;By Clark Nardinelli</em></p>
<p>&nbsp;A new article in the Fall Issue of the Journal of Benefit-Cost Analysis (JBCA),&nbsp;&nbsp;<a href="https://doi.org/10.1017/bca.2018.18">“Some Pitfalls of Practical Benefit-Cost Analysis,”</a>&nbsp; describes common pitfalls that well-meaning analysts fall into. Over the past 23 years I have worked on and supervised hundreds of benefit-cost analyses. Most of these analyses have dealt with public health regulations proposed by the Food and Drug Administration, although on occasion I have reviewed analyses from other government agencies and academia. I’ve seen these pitfalls occur many times and at one time or another I’ve been guilty of most of them.</p>
<p><!--break--></p>
<p>Benefit-cost analysis can have great value in creating efficient regulations and in making the effects of regulations and policies accessible to policy makers and the public. From public investments to traffic control to educational choice, benefit-cost analysis has shown its value. Several articles in the JBCA over the years have highlighted “good practices” in specific areas where benefit-cost analysis is done, notably papers by <a href="https://doi.org/10.1017/bca.2017.11">Susan Dudley (with others)</a>, and by <a href="https://doi.org/10.1017/bca.2017.12">Scott Farrow and Kip Viscusi</a>.</p>
<p>Much of the good – which far outweighs the bad – has come from better data and methods and the growth of the profession of benefit-cost analysis (evidenced by the creation of the Society for Benefit-Cost Analysis and the JBCA). These developments include the practical use of a wide array of methods to evoke revealed and stated preferences for non-standard goods and services, the vast output of data amenable to benefit-cost manipulations, and the external benefits of having so many skilled practitioners doing and reviewing work in the field.</p>
<p>The bad side of benefit and costs often comes from failure to follow best practices, and the inherent difficulty of estimating benefits and costs in the messy real world. In spite of the best training, guidance, and intentions, practitioners can stumble; practical benefit-cost analysis is hard and mistakes get made.</p>
<p>The common mistakes made by practitioners can be sorted into either “buckets” or pitfalls. These include difficulty identifying market and other failures, the potential of partial measures to be misleading, the dangers of stories without numbers, the failure to correctly identify causation or what leads to what, the confusion associated with separating opportunity costs from transfers and vice versa, the errors caused by incorrect baselines, and the many difficulties associated with identifying behavioral failures.</p>
<p>Avoiding these pitfalls can be challenging. One key is to recognize the distinction between the real world (where the policy operates) and the ideal world of economic modeling (where the analysts get their tools). Thus, the practitioner needs to ask (and answer) questions such as: “What is the problem the policy is trying to fix and how large is it?” “What will the world be like with and without the policy intervention?” “Will the policy work to change behavior in desired directions?” “Are we able to quantify the most important benefits and costs?”</p>
<p>The final pitfall I describe is the use of old analyses renovated to fit new questions. If a previous analysis dealt with a similar question, analysts may be tempted to use it again. Uncritically using a preceding analysis, however, can lead to problems if the old analysis embodies one or more pitfalls. Moreover, methods and measures change, sometimes as part of the normal course of events and sometimes because we get better at benefit-cost analysis.</p>
<p>The re-use of an old analysis also illustrates the larger problem of doing benefit-cost analysis by rote, without hard thinking about what the benefits and costs really are. Most of the pitfalls can be avoided by an awareness of what the questions are and careful thought about whether the measures being used in fact capture this reality.</p>
<p>The value of benefit-cost analysis depends on its being done honestly and well. The existence of pitfalls demonstrates the difficulty of doing benefit-cost analysis and the need to exercise care at each step of an analysis. The value and importance of good practical analysis demands that we exercise this care; the most important way to do this is awareness of what we are trying to do and what can go wrong.</p>
<p><a><em>Note from the editor: The article on which this blog is based, “</em></a><em><a href="https://doi.org/10.1017/bca.2018.18">Some Pitfalls of Practical Benefit-Cost Analysis</a>,” is available on first view and will be accessible free of charge through September.</em></p>
</div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/balance" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">On Balance</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/blog" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Blog</a></div></div></div>Mon, 10 Sep 2018 18:57:48 +0000drohanmgmt292 at http://benefitcostanalysis.orgOn Balance: Reflecting on the Longevity of Executive Order 12866 and Looking to the Futurehttp://benefitcostanalysis.org/balance-reflecting-longevity-executive-order-12866-and-looking-future
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p><img style="width: 150px; height: 144px; float: left; border-width: 1px; border-style: solid; margin-left: 5px; margin-right: 5px;" class="media-element file-default" data-delta="1" typeof="foaf:Image" src="http://benefitcostanalysis.org/sites/default/files/Clark.Nardinelli_1.jpg" width="700" height="672" alt="" /><img style="width: 150px; height: 144px; float: left; border-width: 1px; border-style: solid; margin-left: 5px; margin-right: 5px;" class="media-element file-default" data-delta="2" typeof="foaf:Image" src="http://benefitcostanalysis.org/sites/default/files/dudley.jpg" width="200" height="206" alt="" />August 28, 2018</p>
<p><em>By Clark Nardinelli and Susan Dudley</em></p>
<p>Next month marks the 25<sup>th</sup> anniversary of <a href="https://www.archives.gov/files/federal-register/executive-orders/pdf/12866.pdf" target="_blank">Executive Order (EO) 12866</a>, which requires U.S. federal agencies, “in deciding whether and how to regulate, [to] assess all costs and benefits of available regulatory alternatives, including the alternative of not regulating.” It further states that, “in choosing among alternative regulatory approaches, agencies should select those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity), unless a statute requires another regulatory approach.”</p>
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<p>Since it was signed on September 30, 1993, four different presidents with markedly diverse regulatory philosophies have relied on EO12866 to guide both the procedures and analytical practices for developing new regulations.</p>
<p>To commemorate the 25<sup>th</sup> anniversary of EO 12866, <a href="https://benefitcostanalysis.org/">the Society for Benefit-Cost Analysis</a>&nbsp; is co-sponsoring a forum with the George Washington University (GW) <a href="https://regulatorystudies.columbian.gwu.edu/" target="_blank">Regulatory Studies Center</a>&nbsp;, the <a href="https://www.americanbar.org/groups/administrative_law.html" target="_Blank">Section of Administrative Law and Regulatory Practice</a>&nbsp; of the American Bar Association, and the <a href="https://tspppa.gwu.edu/" target="_Blank">Trachtenberg School of Public Policy &amp; Public Administration</a>&nbsp;at GW. The forum, to be held on the GW campus on the afternoon of September 24, will feature panels addressing the past, present, and future of EO 12866.</p>
<p>On one panel, past administrators of the <a href="https://www.whitehouse.gov/omb/information-regulatory-affairs/" target="_blank">Office of Information and Regulatory Affairs</a>&nbsp; (OIRA) from the Clinton, Bush, and Obama administrations, along with senior career agency officials who have worked across administrations, will reflect on the Executive Order’s longevity. On another panel, congressional staff will discuss legislative initiatives aimed at regulatory benefit-cost analysis. A third panel will look to what the future for regulatory analysis and oversight might hold, with insights from the current OIRA administrator and officials from both federal executive departments and independent regulatory agencies.</p>
<p>EO 12866 was not the United States’ first requirement for regulatory benefit-cost analysis, but the order’s durability suggests that the principle—that regulatory actions should be based on evidence of likely benefits and costs—is here to stay. Presidents Gerald Ford and Jimmy Carter both issued executive orders directing agencies to assess the effects of regulations (see, for example, <a href="https://www.cambridge.org/core/journals/journal-of-benefit-cost-analysis/article/council-on-wage-and-price-stability-a-retrospective/E9E4E435450AA2C54DA695D6DED1B8E2" target="_Blank">an article</a>&nbsp; by Thomas Hopkins and Laura Stanley in the Summer 2015 issue of the Journal of Benefit Cost Analysis). Although neither order used the words benefit-cost analysis, that’s what they implicitly called for.</p>
<p>Benefits and costs finally took center stage with <a href="https://www.archives.gov/federal-register/codification/executive-order/12291.html" target="_Blank">EO 12291</a>, issued in the early days of the Reagan Administration. For several reasons, many expected EO 12291 to be revoked when President Bill Clinton took office – and it was. What was unexpected was that it would be replaced by more thorough and sweeping requirements for benefit-cost analysis: EO 12866.</p>
<p>EO 12866 talks about benefit-cost analysis at three levels: as a principle, as a general practice, and as a set of necessary requirements. Among other “Principles of Regulation” enumerated in EO 12866, number 6 states, “Each agency shall assess both the costs and the benefits of the intended regulation…” In other words, good rulemaking should use benefit-cost analysis. After defining regulatory significance, EO 12866 states that, for each significant regulatory action, “the agency shall provide to OIRA “[a]n assessment of the potential costs and benefits of the regulatory action...”</p>
<p>For economically significant regulations (generally those with annual impacts of $100 million or more), a regulatory analysis is required, which additionally contains: “[a]n assessment, including the underlying analysis, of benefits anticipated from the regulatory action,” “[a]n assessment, including the underlying analysis, of costs anticipated from the regulatory action,” and “[a]n assessment, including the underlying analysis, of cost and benefits of potentially effective and reasonably feasible alternatives to the planned regulation.”</p>
<p>EO 12866, combining principles of good rule making with procedures to make those principles effective, has shown its mettle for 25 years. Since President Clinton signed&nbsp;EO 12866 in 1993, it has been applied to more than <a href="https://Reginfo.gov" target="_Blank">14,500 significant regulations</a>&nbsp;, cutting across all sectors of the government.</p>
<p>The anniversary marks a fitting time for commemoration, both to look at how regulation would have been different without the executive order and to think about what comes next for regulation and regulatory review.</p>
<p>For registration and other related details, please click <a href="https://www.eventbrite.com/e/a-forum-celebrating-25-years-of-executive-order-12866-tickets-49347158680" target="_blank"><u>here</u></a>&nbsp; &nbsp;We hope to see you on September 24, 2018.</p>
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<p><em>Susan E. Dudley, past president of the&nbsp;Society for Benefit-Cost Analysis,&nbsp;directs the&nbsp;George Washington University&nbsp;Regulatory Studies Center&nbsp;and&nbsp;is distinguished professor of practice&nbsp;in the&nbsp;Trachtenberg School of&nbsp;Public Policy &amp; Public Administration.</em></p>
<p><em>Clark Nardinelli serves as Chief Economist of the US Food and Drug Administration and is currently vice president of the&nbsp;Society for Benefit-Cost Analysis.</em></p>
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</div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/balance" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">On Balance</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/blog" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Blog</a></div></div></div>Tue, 28 Aug 2018 15:12:45 +0000drohanmgmt291 at http://benefitcostanalysis.orgOn Balance: Reporting back: the World Congress for Environmental and Resource Economists in Gothenburg, Swedenhttp://benefitcostanalysis.org/balance-reporting-back-world-congress-environmental-and-resource-economists-gothenburg-sweden
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p><img style="float: left; height: 122px; width: 140px; border-width: 1px; border-style: solid; margin-left: 5px; margin-right: 5px;" class="media-element file-default" data-delta="1" typeof="foaf:Image" src="http://benefitcostanalysis.org/sites/default/files/Sonja%20K%20-%20Picture.jpg" width="2173" height="2040" alt="" />August 14, 2018</p>
<p><em>By Sonja Kolstoe</em></p>
<p>Gothenburg, Sweden hosted the 2018 <a href="http://www.wcere2018.org/">World Congress for Environmental and Resource Economists</a>, which met from June 25-29, 2018. The five-day conference was held at the <a href="http://www.eaere-conferences.org/doc/upload/WCERE2018_All_you_need_to_know_part_120180624104225.pdf">School of Business, Economics, and Law</a>, which is part of the University of Gothenburg. The conference was made possible by the joint effort of three major economics associations: the <a href="http://www.aere.org/">Association of Environmental and Resource Economists </a>(AERE), <a href="http://www.eaaere.org/">the East Asian AERE</a> (EAAERE), and <a href="http://www.eaaere.org/">the European AERE</a> (EAERE).</p>
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<p>To put into perspective the scale (and importance) of this conference, consider that this conference, which occurs only once every four years, attracted over 1,500 participants, with a <a href="http://www.eaere-conferences.org/doc/upload/Detailed_congress_schedule_WCERE_201820180615171056.pdf">program</a> that included more than 1,000 papers, 30 policy sessions, 70 thematic sessions, a large poster luncheon, and six plenary sessions. During the parallel sessions, I and many others found ourselves struggling with the happy conundrum of having to choose among several high-quality concurrent sessions.</p>
<p>This was my first time attending a World Congress. As a non-market valuation economist specializing in revealed and stated preference methods, I enjoyed the opportunity to discuss these methods and network with others from around the globe. For me, the week started off on a high-note as <a href="http://iop.harvard.edu/fellows/gina-mccarthy">Gina McCarthy</a>, the <a href="https://youtu.be/-dO2yn1Qfx0">opening keynote speaker</a>, publicly praised stated preference methods and the rigor with which these studies are conducted. In a benefit-cost analysis (BCA), accounting for benefits of a policy often is more difficult than accounting for the costs, thus making non-market valuation a fundamental part of BCA. Methodological issues transcend differences in institutions, policies and applications, a major point and key takeaway from this conference. (Some of these issues are explored in a symposium in the Spring 2018 issue of the <a href="https://www.cambridge.org/core/journals/journal-of-benefit-cost-analysis/issue/1CA8476C9D5A626391216547A9D558C7">JBCA: The Application of BCA in Europe – Experiences and Challenges</a>.)</p>
<p>Another highlight with direct applications to BCA was the policy session, “Best Practices in Revealed Preference Approaches for Nonmarket Valuation Methods that Inform Environmental Policy,” organized by Catherine Kling (Iowa State/Cornell University). The session included talks on best practices for hedonic property value studies, hedonic wage studies, and recreational demand models. The three papers presented in this session were commissioned by the <em><a href="https://academic.oup.com/reep">Review of Environmental Economics and Policy</a>,</em> and will be part of a future symposium on the topic in that journal.</p>
<p>The Best Practices session built on a recently published paper recommending best practices for stated preference studies (Johnston et al. 2017); this large scale effort in turn updated the findings in the report of the <a href="http://www.economia.unimib.it/DATA/moduli/7_6067/materiale/noaa%20report.pdf">NOAA Blue Ribbon Panel on Contingent Valuation</a> in 1993—an early effort that involved Nobel Prize winners Kenneth Arrow and Robert Solow, as well as other prominent economists and sociologists. The papers presented in the session further underscore the importance of work by economists to produce robust estimates of non-market values that can be used in BCAs, and thereby support evidence-based policy decisions.</p>
<p>A recurring theme in the plenary talks—as well as in many of the sessions—was the importance of economics to good policy making. Time after time, talks reinforced how economics has helped policy makers design better policies that seek to maximize society’s welfare. For example, in her talk entitled, “<a href="https://www.youtube.com/watch?v=tO7ijo6mUjA">Compliance in Social Dilemmas: Insights from Experiments</a>,” Lata Gangadharan (Monash University) discussed her work in experimental economics studying the use of competitive tournaments among firms, and how well-designed regulatory schemes and wage contracts can improve compliance with environmental regulations. A talk by David Hendry (Oxford University), “<a href="https://www.youtube.com/watch?v=t5A7kwdapDI">Climate Econometrics</a>,” focused on the importance of model selection in time-series forecasting. Meredith Fowlie (University of California, Berkeley) spoke on “<a href="https://unduhvideo.org/video/hpLG3QTyo_w/carbon-pricing-in-the-real-world-by-meredith-fowlie-hd.html">Carbon Pricing in the Real World</a>” and discussed how studies using randomized control trials, and quasi-random experiments involving energy markets, can help us learn about carbon pricing and make the most of available data. Last, a talk by Nava Ashraf (London School of Economics) on “<a href="https://www.youtube.com/watch?v=Uobi2uxPPF8">Human Nature and Human Development</a>” discussed how lab and field experiments conducted by behavioral economists can help us better understand human behavior and develop products, programs, and policies that improve welfare.</p>
<p>The wonderful weather and social gatherings (coffee breaks, organized receptions, socials, and a Congress dinner) provided everyone with ample opportunity to follow the advice given by Thomas Sterner (University of Gothenburg, Sweden) and Asa Lofgren (University of Gothenburg, Sweden) at the start of the conference to “make the most of our time together by getting to know new people, challenge and improve each other’s ideas, and strike up new research collaborations.” I truly enjoyed my time in Sweden at this global “meeting of the minds”.</p>
<p><em>Sonja Kolstoe is an Assistant Professor of Economics at Salisbury University in the Department of Economics and Finance in the Franklin P. Perdue School of Business with a joint appointment in the Department of Environmental Studies in the Fulton School of Liberal Arts. Her research focuses&nbsp;primarily on the&nbsp;non-market valuation of environmental goods and services,&nbsp;using revealed- and stated-preference techniques.&nbsp;​</em></p>
<p>References:</p>
<ul>
<li>RJ Johnston, KJ Boyle, W Adamowicz, J Bennett, R Brouwer, TA Cameron, WM Hanemann, N Hanley, M Ryan, R Scarpa, R Tourangeau, and CA Vossler. 2017. Contemporary guidance for stated preference studies. <em>Journal of the Association of Environmental and Resource Economists</em> 4(2):319-405.</li>
</ul>
<p><em>I want to thank Sandra Hoffman for inviting me to write this blog for the Society for Benefit-Cost Analysis.</em></p>
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</div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/balance" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">On Balance</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/blog" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Blog</a></div></div></div>Tue, 14 Aug 2018 21:15:38 +0000drohanmgmt289 at http://benefitcostanalysis.orgOn Balance: Review of “Teaching Benefit-Cost Analysis” by Scott Farrowhttp://benefitcostanalysis.org/balance-review-%E2%80%9Cteaching-benefit-cost-analysis%E2%80%9D-scott-farrow
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p><img style="height: 152px; width: 110px; float: left; margin: 5px; border-width: 1px; border-style: solid;" class="media-element file-default" data-delta="1" typeof="foaf:Image" src="http://benefitcostanalysis.org/sites/default/files/Joe%20Cordes%20-%20Headshot.jpg" width="1236" height="1710" alt="" />August 1, 2018&nbsp;</p>
<p><em>By Joseph Cordes&nbsp;</em></p>
<p>As the feasibility of using benefit-cost analysis (BCA) as a practical tool of policy analysis has increased, so too has the need for materials to aid those of us who are called upon to teach BCA. <a href="https://www.e-elgar.com/shop/teaching-benefit-cost-analysis"><em>Teaching Benefit-Cost Analysis: Tools of the Trade</em></a>, edited by Scott Farrow (Professor of Economics, University of Maryland, Baltimore County), is a distinctive and welcome addition to the collection of such materials.</p>
<p><!--break--><p>The volume is part of the <a href="https://www.e-elgar.com/shop/books?book_series=Elgar%20Guides%20to%20Teaching"><em>Elgar Guides to Teaching</em></a>&nbsp;series from Edward Elgar Publishing. It differs from traditional textbooks on BCA in that teachers of benefit-cost analysis, rather than students, are the intended audience. The book comprises nineteen chapters, which are organized into two thematic sections; one section focuses on broad conceptual issues in undertaking benefit-cost analysis, and the other contains entries on specific issues that arise in implementing different types of BCA.</p>
<p>Topics covered in the conceptual section include classics such as consumer surplus as a welfare measure in BCA, the concept of standing, BCA decision rules, and market failure analysis as a basic underpinning of BCA. The remainder of the volume covers a diverse mix of specific topics. Some—such as the value of marginal analysis in BCA, the treatment of increases and decreasing in employment in BCA, BCA and addiction, the ingredients method of defining and measuring costs, distributional accounting, the use of case studies, and simulation in BCA—are of general relevance in any course on BCA. The chapters on valuing statistical lives and on applying benefit-cost or cost-effectiveness analysis to health policy would be of particular value to those tasked with teaching BCA in health policy programs or schools of public health. The chapters on using BCA to evaluate transport and land use decisions and government support of R&amp;D provide important and interesting examples of how to apply BCA to public investments.</p>
<p>Each entry is compact and self-contained, allowing the potential user to focus on those issues of greatest interest. Entries typically include not only an exposition of the particular topic, but also potential readings and, in many cases, student problems to use in the classroom setting.</p>
<p>A particular strength of the volume is its coverage of topics that are not likely to be found in a standard benefit-cost analysis textbook. These include principles to be followed in defining the counterfactual (baseline) in a BCA, the role of partial equilibrium vs. general equilibrium analysis, and a brief primer on how to structure a BCA short course. Indeed, as I write this review, I find the chapter on defining the baseline to be extremely useful in commenting on an&nbsp;<a href="https://www.federalregister.gov/documents/2018/06/13/2018-12707/increasing-consistency-and-transparency-in-considering-costs-and-benefits-in-the-rulemaking-process">ANPRM </a>(Advanced Notice of Proposed Rulemaking) concerning BCA that was recently issued by the U.S. Environmental Protection Agency. Other topics receiving treatment in the volume that are not covered extensively in most texts, if at all, are the ingredients method of cost analysis, the treatment of changes in employment, and distributional accounting.</p>
<p>As someone who teaches both a “standard” BCA class to students in a&nbsp;<a href="https://www.gwu.edu/schools-colleges">Master’s in Public Policy Program </a>, and a short course in BCA for government and nonprofit professionals, I can see several possible uses for the volume. The most obvious is to improve the coverage of standard topics, such as decision rules, marginal analysis, and the value of a statistical life. Another is to add depth by including some of the topics highlighted above as often not receiving as much treatment as they deserve.</p>
<p>Another use would be to assign selected chapters as readings for the students. The entries are generally well-written and most are pitched at a level of technical detail to make the material accessible to any student who has had a prior course in intermediate microeconomics. The exceptions to this rule are the chapters on measures of welfare change, partial and general equilibrium, and uncertainty and risk, which would make excellent additions to more advanced courses in BCA.</p>
<p>A potentially significant limitation of the volume is its cost--$125.00. A possible suggestion for Edward Elgar Publishing would be to consider creating an on-line version of the volume, to allow instructors to “pay by the piece” for the chapters that they would find most useful. Even at the stated price, however, <em>Teaching Benefit Cost Analysis</em> passes its own “benefit-cost test.” Namely it is certainly worth the cost for university libraries to order the volume. Moreover, it deserves to be on the shelves of those among us who teach BCA on a regular basis—alongside standard textbooks in BCA, several of which have been authored or co-authored by the contributors to this useful volume.</p>
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<div uage="JavaScript"><em>Addendum:&nbsp; Since preparing this review, the author has learned that Edward Elgar is offering&nbsp;Teaching Benefit-Cost Analysis&nbsp;at a reduced price of $117 online.&nbsp; The book is also available for $40 or less as an ebook.&nbsp; The hardcover can be purchased directly from <a href="https://www.e-elgar.com/shop/teaching-benefit-cost-analysis">this page</a>, which also includes links to purchase the e-book from eBooks.com or Google Play. A paperback version will be availible in Spring 2019.&nbsp;</em></div>
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<p><em>Joseph Cordes is Professor of Economics, Public Policy and Public Administration, and International Affairs at The George Washington University.&nbsp; He is a past president of the Society for Benefit Cost Analysis and has taught benefit cost analysis both to Master's students and working professionals for the past 20 years.&nbsp;</em></p>
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</div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/balance" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">On Balance</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/blog" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Blog</a></div></div></div>Wed, 01 Aug 2018 18:11:49 +0000drohanmgmt287 at http://benefitcostanalysis.org